2017 european payment systems competitive strategy ... · 2017 european payment systems competitive...
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2017 European Payment Systems Competitive Strategy Innovation
and Leadership Award
EUROPEAN PAYMENT SYSTEMS COMPETITIVE STRATEGY INNOVATION
AND LEADERSHIP AWARD
2017
BEST PRACTICES RESEARCH
© Frost & Sullivan 2017 2 “We Accelerate Growth”
Contents
Background and Company Performance Industry Challenges ......................................................... 3
Strategy Innovation and Customer Impact ........................................................................... 4
Conclusion ........................................................................................................................ 7
Significance of Competitive Strategy Innovation and Leadership .................................................... 8
Understanding Competitive Strategy Innovation and Leadership .................................................... 8
Best Practices Recognition: 10 Steps to Researching, Identifying, and Recognizing Best Practices .....10
The Intersection between 360-Degree Research and Best Practices Awards ....................................11
Research Methodology ......................................................................................................11
About Frost & Sullivan .............................................................................................................11
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Background and Company Performance Industry Challenges
As online payments and e-commerce become ubiquitous across the globe, the security,
flexibility, and reliability of payment services become paramount to facilitate transactions.
Frost & Sullivan research projects that by 2025, 75% of financial transactions will flow
through cloud-based platforms (i.e., cloud computing).1 As private clouds, collaboration
approaches, and multi-channel messaging gain greater acceptance, demand for cloud
computing will only grow and spur development in infrastructure as a service (IaaS)
offerings. Increasingly, business agility, time to market speed, and uptime will become
unavoidable imperatives for processors working for e-commerce operations and financial
institutions. Consumers expect merchants and financial institutions to provide more
convenient and frictionless options, attendant to the rise of mobile apps, ubiquitous
Internet penetration, and cashless technologies. Providers seeking to service the new
markets of payment systems and processing must break down silos and expand their
reach to meet the demands required for real-time electronic payment solutions.2
E-commerce options, while increasingly popular, require significant attention to develop
an ecosystem of payment acceptors at the endpoints, remain apprised of security
developments, and connect an international network of transaction and compliance
mechanisms. Data management will automate and disintermediate legacy systems, but
providers must strategize effectively now to take advantage of emerging technologies
such as blockchain, machine learning, fraud analytics, and artificial intelligence. Smart
contracting and process automation are enabling preset protocols to decrease the time
required for transactions based on concrete regulations which significantly reduce the time
required for processing.3
Frost & Sullivan research projects serious disruptions creating growth opportunities in the
payment systems and processing space. The payment infrastructure—from consumer
transactions to large enterprise applications and central banks—will experience
automation like never before and must adapt to the rapid imperatives of global
transactions. The Internet of Things and blockchain-based applications will grow
precipitously in the next two to three years as more applications and industries adopt.
Security will remain an ever-present concern as the number of endpoints involved open up
potential vulnerabilities to the system and risk for fraud or malfeasance.4
1 Future of Financial Services: Growth in FinTech is Shaping the Future of Invisible Finance & Virtual Banking (Frost & Sullivan, November 2016). 2 Digital Disruption in the Global Financial Services Sector: Innovations Around AI, ML, and Robo-advisory Will Drive Disruptions Over the Next 5 Years (Frost & Sullivan, November 2016). 3 Future of Financial Services: Growth in FinTech is Shaping the Future of Invisible Finance & Virtual Banking (Frost & Sullivan, September 2016); and Convergence of Artificial Intelligence (AI) and the Finance Industry: Robo-trading, Robo-advisors, Consumer Smart Wallets, Insurance, and Fraud Analytics Set the stage for Massive Disruption (Frost & Sullivan, April 2016). 4 FinTech in Europe, 2016: Advanced Technologies to Become Mainstream in the Next 5 Years, as Adoption Increases across the Region (Frost & Sullivan, January 2017).
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Technological innovations for the point of sale, online transfer applications, and mobile
wallets extend the reach of the banking sector and enable new webs of commerce,
inclusion, and competition among merchant service providers. The result of which is
downward pressure on transaction fees. A fee per transaction remains the dominant
business model, and competition among payment processors and solutions providers
grows fierce. Technological innovations represent merely one field of competition among
processors—other competitive variables include flexibility, ecosystem integration,
international reach, security, and client service quality. Providers must adapt and
incorporate these multiple factors to lead this highly competitive and complex market
successfully.
Strategy Innovation and Customer Impact of ACI Worldwide
With over 40 years’ experience in the payments sector and offices in 35 countries, ACI
Worldwide (ACI) enables payment capabilities across payment types, channels,
currencies, and networks. ACI offers a spectrum of electronic payment solutions geared
toward consumer payments, transaction banking, merchant payments and digital
commerce, and bill payment services. ACI connects a portfolio of local payment methods,
acquirers and networks through a single integration for streamlining cross-border
commerce. Since deciding to expand focus, which historically included banks and
intermediaries, to encompassing digital commerce and electronic payments up and down
the value chain, Frost & Sullivan believes ACI’s record of adaptation demonstrates
exemplary strategy and execution.
Local Reach
ACI offers a comprehensive set of products for the European market, with more
connectors and gateways accepting more payment types across the world, from e-
commerce payment gateways to payment engines with embedded fraud detection. ACI
finalized consolidation of its data housing and performance with the opening of its
Limerick, Ireland data center in October 2016. The cutting-edge facility ensures reliability,
security, and compliance with European data privacy laws, in addition to expanding the
capabilities, such as hosted private cloud services. This center builds on top of ACI’s
existing infrastructure and local office locations in Belgium, France, Germany, Greece,
Ireland, Italy, Netherlands, Romania, Russia, Spain, Sweden, and the United Kingdom,
among others. Local offices operate with sufficient autonomy to make decisions fast and
speed up implementation and deployment processes, as well as give feedback to
countrymen on-site to effectively allocate resources. ACI connects customers through the
breadth and depth of its international reach for locally preferred payment methods, with
more than 350 card acquirers and alternative payment methods and approximately
12,000 connections available.
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Integrating Strategic Acquisitions Create Unique Value
Beginning in 2012, ACI realized that it lacked e-commerce capabilities to cope with
expected demand and developed a significant acquisition strategy that it implemented
over the ensuing years:
2012: The acquisition of Distra Pty Ltd (Distra) included technology for its service-
oriented-architecture-based platform infrastructure that augmented ACI with greater
flexibility and time to market. With the integrated platform, customers, such as financial
institutions, processors, and retailers, can meet rising market trends with agility and
develop new features in multichannel engagement and payment service hubs.
Also in 2012, the acquisition of S1 extended the company's global reach for merchant
payments processing as well as strengthened its corporate banking capabilities.
2014: The acquisition of UK-based Retail Decisions (ReD) bolstered ACI’s fraud protection
measures as more crime moved online and e-commerce security grew. ReD’s solutions not
only help prevent and reduce fraud loss, but supplement fraud management teams to
become more efficient. ACI profited from the rise in card-not-present transaction fraud as
(Europay-MasterCard-Visa) EMV chip card adoption increased.
2015: The acquisition of Germany’s PAY.ON significantly expanded ACI’s applicability to
alternative payment methods and card acquirers and accelerating cross-border commerce
across multiple channels.
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The combination of ACI with the PAY.ON payment gateway and the ReD Shield real-time
fraud prevention software comprise the UP eCommerce Payments solution, offering omni-
channel solutions for online merchants and global customers. Acquisitions helped
consolidate market share, upgrade feature functions, and extend distribution for the UP
eCommerce Payments solution. With these acquisitions ACI has invested in growth and
retained the employees and infrastructure of the acquired companies.
Providing Exceptional Value
ACI focuses on building a competitive moat around its expansive portfolio with a long-
term value offering. Across its segment, with specific offerings (for e-commerce,
processors, commercial and retail banks), ACI strives to maintain its reputation for
“always-on” availability and enabling the features and functions that customers require for
new revenue generating operations. The white label UP eCommerce Payments solution
includes embedded fraud and risk management, as well as a record of boosting conversion
rates. Moreover, ACI requires less capital investment for scaling up; whereas competitors
would require purchasing new hardware, ACI can scale up the software with faster and
easier implementation to cope with greater volume. The reliability and flexibility of ACI’s
software and software as a service offerings reduce a customer’s configuration schedule
and time to market; typically, e-commerce implementations are up and running in 3
months rather than 7 to 12 months with other providers. Furthermore, ACI’s automated
dispute management system resolves issues faster and with fewer errors than a client’s
legacy paper-based system.
Dedication to Value
ACI demonstrates astute concern for ensuring that its solutions maintain trust, addressing
customer concerns for the ongoing security and performance of systems. The company
invests approximately 17% of its annual budget into research and development, keeping
abreast of the latest technology developments. For example, ACI is modeling, and already
running a proof-of-concept, for a project enabling central banks and clearing houses to
operate on a blockchain. Through its technical expertise, ACI already runs some of the
fastest transactions through its UP Immediate Payments solution deployed in Singapore,
the UK, and Australia, among other regions. Moreover, ACI’s presence in Europe validates
a commitment to rigorous fraud protection with machine learning and artificial intelligence
capabilities available to clients. ACI works closely with its customers to coordinate
customized versions of its real-time integrated fraud prevention, in addition to fraud
detection analytics, adaptive machine learning, sanctions filter, and anti-money laundering
measures. Fraud attempts denied by ACI’s solutions save customers money, save time by
reducing manual reviews required, and bring chargeback rates down precipitously.
Further, the protections afforded by ACI’s solutions are a drop in the bucket compared the
hundreds of millions of dollars and Euros in fines potentially levied against organizations
shirking due diligence to prevent money laundering.
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Differentiating through Customer Experience
With a keen awareness of the competitive environment, ACI systematized efforts to make
customer experience a point of differentiation, particularly when technology does not
provide a reassuring touch. ACI is currently designing a signature method of customer
interaction, built around core principles of building trust in the relationship. Across
interactions with ACI, from pre-sales to sales, to implementation, to product management,
or back end, the comprehensive customer experience will ensure satisfaction with ACI’s
business model. Moreover, concentrated efforts already underway to improve the
customer experience in the back office operations (billing and invoicing) are already
achieving tremendous feedback and yielding improved results. The global support team
includes more than 300 individuals providing 24-7-365 assistance through web, phone,
and email.
Conclusion
With competitive pressures on payment initiators and compliance burdens on financial
institutions, ACI expedites processes and relationships in the payments ecosystem. ACI
demonstrates a keen awareness of future developments and invests in organic and
inorganic growth to capitalize on emerging trends. With a string of strategic acquisitions,
investment in technology, and commitment to customer service, ACI efficiently executes
plans to grow its strengths in the payment systems space. Differentiating itself from
competitors, ACI facilitates painless transactions across borders and channels. In the fast
moving world of cashless payments and online transactions, ACI provides proven solutions
making commerce frictionless for clients up and down the value chain.
With its strong overall performance and rigorous pursuit of differentiators, ACI Worldwide
earns Frost & Sullivan’s 2017 Europe Competitive Strategy Innovation and Leadership
Award for the payment systems market.
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Significance of Competitive Strategy Innovation and Leadership
Any successful approach to achieving top-line growth must (1) take into account what
competitors are, and are not, doing; (2) meet customer demand with a comprehensive,
value-driven product or service portfolio; and (3) establish a brand that resonates deeply
with customers and stands apart from other providers. Companies must succeed in these
three areas—brand, demand, and positioning—to achieve best-practice levels in
competitive strategy.
Understanding Competitive Strategy Innovation and Leadership
As discussed above, driving demand, brand strength, and competitive differentiation all
play a critical role in delivering unique value to customers. This three-fold focus, however,
must ideally be complemented by an equally rigorous focus on Strategy Innovation and
Customer Impact.
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Key Benchmarking Criteria
For the Competitive Strategy Innovation and Leadership Award, Frost & Sullivan analysts
independently evaluated two key factors—Strategy Innovation and Customer Impact—
according to the criteria identified below.
Strategy Innovation
Criterion 1: Strategy Effectiveness
Criterion 2: Strategy Execution
Criterion 3: Competitive Differentiation
Criterion 4: Executive Team Alignment
Criterion 5: Stakeholder Integration
Customer Impact
Criterion 1: Price/Performance Value
Criterion 2: Customer Purchase Experience
Criterion 3: Customer Ownership Experience
Criterion 4: Customer Service Experience
Criterion 5: Brand Equity
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Best Practices Recognition: 10 Steps to Researching, Identifying, and Recognizing Best Practices
Frost & Sullivan analysts follow a 10-step process to evaluate Award candidates and
assess their fit with select best practice criteria. The reputation and integrity of the
Awards are based on close adherence to this process.
STEP OBJECTIVE KEY ACTIVITIES OUTPUT
1 Monitor, target, and screen
Identify Award recipient candidates from around the globe
Conduct in-depth industry research
Identify emerging sectors
Scan multiple geographies
Pipeline of candidates who potentially meet all best-practice criteria
2 Perform 360-degree research
Perform comprehensive, 360-degree research on all candidates in the pipeline
Interview thought leaders and industry practitioners
Assess candidates’ fit with best-practice criteria
Rank all candidates
Matrix positioning all candidates’ performance relative to one another
3
Invite thought leadership in best practices
Perform in-depth examination of all candidates
Confirm best-practice criteria Examine eligibility of all
candidates Identify any information gaps
Detailed profiles of all ranked candidates
4
Initiate research director review
Conduct an unbiased evaluation of all candidate profiles
Brainstorm ranking options Invite multiple perspectives
on candidates’ performance Update candidate profiles
Final prioritization of all eligible candidates and companion best-practice positioning paper
5
Assemble panel of industry experts
Present findings to an expert panel of industry thought leaders
Share findings Strengthen cases for
candidate eligibility Prioritize candidates
Refined list of prioritized Award candidates
6
Conduct global industry review
Build consensus on Award candidates’ eligibility
Hold global team meeting to review all candidates
Pressure-test fit with criteria Confirm inclusion of all
eligible candidates
Final list of eligible Award candidates, representing success stories worldwide
7 Perform quality check
Develop official Award consideration materials
Perform final performance benchmarking activities
Write nominations Perform quality review
High-quality, accurate, and creative presentation of nominees’ successes
8
Reconnect with panel of industry experts
Finalize the selection of the best-practice Award recipient
Review analysis with panel Build consensus Select recipient
Decision on which company performs best against all best-practice criteria
9 Communicate recognition
Inform Award recipient of Award recognition
Present Award to the CEO Inspire the organization for
continued success Celebrate the recipient’s
performance
Announcement of Award and plan for how recipient can use the Award to enhance the brand
10 Take strategic action
Upon licensing, company may share Award news with stakeholders and customers
Coordinate media outreach Design a marketing plan Assess Award’s role in future
strategic planning
Widespread awareness of recipient’s Award status among investors, media personnel, and employees
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The Intersection between 360-Degree Research and Best Practices Awards
Research Methodology
Frost & Sullivan’s 360-degree research
methodology represents the analytical
rigor of our research process. It offers a
360-degree-view of industry challenges,
trends, and issues by integrating all 7 of
Frost & Sullivan's research methodologies.
Too often, companies make important
growth decisions based on a narrow
understanding of their environment,
leading to errors of both omission and
commission. Successful growth strategies
are founded on a thorough understanding
of market, technical, economic, financial,
customer, best practices, and demographic
analyses. The integration of these research
disciplines into the 360-degree research
methodology provides an evaluation
platform for benchmarking industry
participants and for identifying those performing at best-in-class levels.
About Frost & Sullivan
Frost & Sullivan, the Growth Partnership Company, enables clients to accelerate growth
and achieve best in class positions in growth, innovation and leadership. The company's
Growth Partnership Service provides the CEO and the CEO's Growth Team with disciplined
research and best practice models to drive the generation, evaluation and implementation
of powerful growth strategies. Frost & Sullivan leverages more than 50 years of
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please visit http://www.frost.com.
360-DEGREE RESEARCH: SEEING ORDER IN
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